It’s not rocket science: Chief Marketing Officers (CMOs) and Chief Financial Officers (CFOs) need to be aligned in order to achieve business growth.
This narrative is commonplace, and yet still a major issue B2B and B2C executives face. Historically, marketing leaders have been primarily focused on driving awareness, while financial leaders have been hard-pressed on performance and driving revenue. In a 2022 survey of senior marketing executives, they cited “managing the tension between brand and performance marketing” of far greater concern than any other issue.
Both CMOs and CFOs play an integral role in driving growth and achieving organizational goals. Marketing initiatives are no longer solely focused on creative endeavors; they must demonstrate tangible returns on investment and contribute to the bottom line. Meanwhile, CFOs are under constant pressure to allocate resources wisely and optimize financial performance for efficiency.
Balancing the need for brand awareness and evangelism with competitive displacement and revenue generation is a delicate act that requires effective communication and collaboration between CMOs, CFOs and their counterparts.
CMOs: If you’re not sure how to communicate with your CFO—this is for you.
How To Justify Your Marketing Budget To The CFO
According to the 2022 CMO Survey, marketing leaders were asked on a scale of 1-7 to rate the likelihood of the CFO working with them as a partner to build a business case for marketing spending. The average was 4.4—not bad, but not great either.
Threats of recession have propelled CMOs and CFOs into conversation like never before in order to reduce expenditures. For marketing leaders, it’s not a matter of choosing between performance marketing and brand marketing—you need both for long-term success. So as the CMO, your job is to communicate the value of investing in both to your financial counterpart. Here’s how.
How to pitch investing in performance marketing
CFOs might be hesitant to give you more budget for traditional performance marketing initiatives because channels like Google and Facebook are oversaturated right now. “User growth is stagnant or declining, there’s finite inventory, and more brands than ever are advertising through those platforms—so it’s getting more expensive to repeatedly target the same audience,” says Tom Kaeding, Chief Financial Officer at Wunderkind. “It’s competitive pricing on whoever is willing to pay the most for a specific slot, so it’s an expensive way to grow your business.”
So, how do you get around this? Pitch investing in your owned channels rather than paid channels with diminishing returns.
When you put your performance marketing budget towards channels like your website, your email program, and SMS marketing—here’s what happens:
- You grow your first-party data lists, which allows you to continuously send relevant messages to your ICP. This gets your brand in their inboxes and top-of-mind with announcements, promotions, and messages that strategically nurtures them toward conversion. “The larger your lists are, the more you can interact with that audience, and if you’re doing it through channels you control, you’re going to see better returns than in those more hyper-competitive channels,” Kaeding says.
- Most marketers can only identify about 2% of their website traffic, but when you invest in customer identification tools, you can retarget a much larger volume of qualified traffic (98%!) with tailored experiences and one-to-one messages. Optimize your website to perform as a lead-generating conversion tool, and you have the opportunity to not only retarget existing customers, but acquire new customers too (who already know who you are—half the battle has already been fought!).
- You can foster stronger loyalty programs and encourage repeat purchases through post-conversion tactics like triggered emails and texts announcing back-in-stock items, discounts, and new collection drops.
All of this, of course, drives your bottom line without relying on third-party cookies or putting your precious marketing dollars in the hands of vendors that can waste it aimlessly.
In terms of metrics that your CFO expects you to report back on—you’ve probably already got them handy. “Along with revenue, marketers should evaluate lifetime value and engagement metrics like open rates and click-through rates. Have a close pulse on that if you’re deploying strategies that cost you each time you engage with an audience.”
How to pitch investing in brand marketing
This one is a bit harder. In previous eras of economic hardship, the companies that have doubled down on their brand marketing have come out on top. For example, during the Great Recession, Kellogg’s doubled its advertising budget, leading to a 30% increase in profit. In 2008, Groupon heavily increased its marketing budget and boasted a $500 million profit. During the pandemic, Airbnb shifted its marketing budget to brand-building strategies over more performance-driven initiatives, and have seen incredible return on investment.
According to Forbes, research indicates that investment in branding increases brand equity, “driving sales volume while increasing the overall value of a company.” This is a long-term play.
Chelsea Grayson, CEO at Spark Networks, recommends combining your brand marketing initiatives with performance marketing. “There are times in the year when you’re more focused on hardcore, surgical performance marketing, versus times when it’s much more brand-driven and focused on developing the relationship with the customer. But for most of the year, the two have to walk hand in hand. It’s all about efficiency and weaponizing brand content over on the performance marketing side.”
In other words, the all-important performance marketing only works if you have a strong brand at the foundation of it. What does your company stand for? What does it look like, sound like, and feel like? What differentiates you from your biggest competitors? According to a Harris Poll research study, 82% of shoppers want a brand’s values to align with their own.
If your target audience doesn’t have a specific feeling or image that comes to mind when they hear your brand’s name, you have work to do. But once you’ve nailed down your brand strategy, you can use it as a primary creative element in your performance marketing strategy.
So, if your CFO wants to pull back on brand marketing, present it as a necessary long-term investment to acquire new customers, increase customer lifetime value, and foster loyalty.
“The partnership between the CMO and the CFO comes down to: How do we spend money to generate the best possible return for the business and the shareholders?” says Bill Ingram, CEO at Wunderkind. “CFOs speak in numbers, so speak their language. Show them the ROI that comes from both brand and performance marketing, and why it’s not only crucial to the company’s top line, but bottom line too.”
Advice from the C-suite: 4 Tips to Align with Your CFO
Tip #1: Connect offline
“The first place to cut money is always marketing,” Grayson says. “So oftentimes, the CMO tries to avoid the CFO at all costs. Instead, the CMO should develop a relationship with the CFO—take her to dinner every once in a while, hop on Zooms just to catch up, and have a weekly touch base. That human relationship is going to make it so much tougher for the CFO to cut dollars on the marketing side. There’s so much tension between those two offices, as if they’re not working toward the same goal. The goal is: Let’s generate revenue.”
Tip #2: Be loud
“There’s a hierarchy in the C-suite, and the two most important people are the CEO and the CFO. Those are the people constantly on earnings calls and giving feedback to the board,” Grayson explains.
“The CMO isn’t always with those people in those important places, so it’s crucial to develop those vertical relationships. Be loud, be confident, be bold. Know when the calls are and insert yourself into those conversations. The board has the least understanding of marketing out of all the departments, so being in those meetings is beneficial to everyone involved.”
Tip #3: Do your research
“Once a CMO successfully persuades a CFO to invest in their marketing budget, they’re going to see more scrutiny, because it’s in the business case,” Jones says. “If you want to take your career forward as a CMO, you have to make leaps of faith. The benefit is that you unlock investment to drive new projects, and if you’ve done the research and proposed the correct investments, it will pay off.”
Tip #4: Understand larger business objectives
“If there’s no incremental value to incremental spend, CFOs get heartburn,” Kaeding says. “There needs to be a very clear commitment from the CMO around the return we’ll get, how we’re going to measure it, and the cadence on reporting back if the spend was effective or not.”
He continues, “My dream as a CFO is proposals that have returns associated with them. The way CMOs can be helpful to CFOs is doing a lot of that work on the forefront and understanding what the objectives are for the organization, and as they’re crafting proposals, being mindful of what the important metrics are for the business right now.”
Align With Other CMOs, Too
Want to know how your fellow CMOs are thinking, feeling, and spending right now? Download Wunderkind’s CMO State Of The Union Report to find out.